US Yields Rise In Electronic Trade Despite Fed

Notes/Observations

• Norway Central bank (Norges) shows some hawkish feathers as it brought forward its 1st potential rate hike
• BOE seen as resisting in following ECB lead on yields and noted that most of the recent pick-up in yields reflected the improving outlook
• US yields continued their ascent. Fed comments continued to suggest that the move higher in bond yields is not yet close to a point where it would trigger a stronger policy response (Note: 10-year govt bond yield tests 1.73% for its highest level since Jan 2020)

Asia:

• New Zealand Q4 GDP Q/Q: -1.0% v +0.2%e; Y/Y: -0.9% v +0.5%e
• Australia Feb Employment Change: +88.7K v +30.0Ke; Unemployment Rate: 5.8% v 6.3%e
• BOJ said to plan on adjusting yield band to +/- 25bps, to get rid of ¥6.0T ETF purchase target, to allow long term rates to fluctuate to ~50bps (currently 40bps)
• China govt said not willing to compromise with the US over sovereignty, China did not have too high or too low expectations about upcoming summit meeting. China said to be planning to lean on the US to reverse many of the Trump administration’s policies that targeted China

Coronavirus:

• Total global cases 121.2M (+0.4% d/d); total deaths: 2.68M (+0.4% d/d)
• AstraZeneca [AZN.UK] CEO: The UK Domestic C-19 supply chain was not experiencing any disruption and no impact on the delivery schedule. Afterwards report circulated that company promised ministers they would be able to increase supply again in May, June and July

Europe:

• Netherlands PM Rutte’s centre-right People’s party expected to win parliament elections according to exit polls (Note: would be 4th term for Rutte)

Americas:

• FOMC left Interest Rates unchanged between 0.00-0.25% range (as expected) with the decision being unanimous. Committed to using its full range of tools to support the economy in challenging time Seven officials saw rates increasing in 2023. Fed Increased overnight reverse repo (ON RRP) size from $30B to $80B per day
• Fed Projections raised 2021 GDP growth forecast from 3.7-5.0% to 5.8-6.6% while cutting the midpoint 2022 GDP from 3.0-3.5% to 3.0-3.8%
• Fed Chair Powell holds post rate decision press conference noted that one-time increases in prices likely to have only transient impact on inflation. Noted that some of the worst economic outcomes had been avoided
• IRS delayed U.S. Tax Deadline to May 17th
• Brazil Central Bank (BCB) raises Selic Target Rate by 75bps to 2.75% (more-than-expected); with another 75bps hike seen coming at next meeting

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.34% at 426.36, FTSE +0.01% at 6,763.13, DAX +0.99% at 14,741.25, CAC-40 +0.22% at 6,068.29, IBEX-35 +0.12% at 8,610.00, FTSE MIB +0.33% at 24,360.50, SMI +0.11% at 10,934.13, S&P 500 Futures -0.37%]
• Market Focal Points/Key Themes: European indices open higher across the board and stayed in the green as the session progressed; sectors leading to the upside include industrials and financials; laggard sectors include consumer discretionary and materials; National Grid announces sale of WPT and acquisition ot TNEC with PPL Energy; focus on upcoming interst rate decision from BOE; earnings expected in the upcoming US session include Weibo, Accenture and Commercial Metals

Equities

• Consumer discretionary: Adidas [ADS.DE] +1% (partnership with Peloton), National Express [NEX.UK] -4% (earnings; acquisition), Ocado [OCDO.UK] -2% (trading update)
• Financials: Deutsche Bank [DBK.DE] +4% (exec comments)
• Industrials: Deutz [DEZ.DE] +6% (earnings)
• Telecom: Nokia [NOKIA.FI] -1% (CMD update)

Speakers

• ECB chief Lagarde testified in EU Parliament and stated she expected an economic rebound in H2 aided by vaccine campaign and relaxation of virus restrictions. She cautioned that downside risks remained and saw no room for complacency as ECB would deliver on its mandate. Faster purchases of PEPP to become visible over longer period and reiterated stance that stands ready to adjust all instruments if needed. Reiterated stance to monitor developments in exchange rate and their implications in medium-term inflation outlook
• Norway Central bank (Norges) Policy Statement brought forward its 1st potential rate hike. Policy rate path forecasted a gradual rise from latter half of 2021 (revised its forward guidance- prior was policy rate would most likely remain at current level for some time to come). When clear signs economic conditions were normalizing, it would be appropriate to raise policy rate
• German Kieler Institut fuer Weltwirtschaft think tank (IFW) updated its economic forecasts and now expected Germany to reach its pre-crisis levels before year-end. Raised 2021 GDP growth forecast from 3.1% to 3.7% and raised the 2022 GDP growth forecast from 4.5% to 4.8%
• Indonesia Central Bank (BI) Policy Statement noted that the policy rate was in line with low and stable inflation and to support IDR currency (Rupiah). To strengthen monetary policy operations to keep policy accommodative and optimize macroeconomic measures to support economic growth. To support repurchase transactions to deepen markets
• Taiwan Central bank (CBC) Policy Statement noted that the decision to keep policy steady was unanimous. To continue accommodative monetary policy and pay close attention to development of pandemic and geopolitical risks. Saw 2021 inflation outlook as mild. Expected stable economic growth in 2021 while seeing stronger momentum in exports
• China Foreign Ministry spokesperson: No plans at this time to discuss any potential Xi-Biden meeting

Currencies/Fixed Income

• USD was firmer in the session (reversed modest losses during Asia) aided by a continued rise in US bond yields despite a dovish Fed earlier on Thursday. 10-year govt bond yield tested 1.73% (highest since Jan 2020) while the 30-year US Treasury moved above 2.50% (highest since Aug 2019). Dealers noted Fed Chair Powell suggested there was no reason to push back against the recent rise in yields, saying financial conditions were highly accommodative. Analysts noted the Fed comments continued to suggest that the move higher in bond yields is not yet close to a point where it would trigger a stronger policy response from the Fed
• Focus turning to BOE rate decision later in the session. BOE seen as unlikely to follow the ECB and increase the pace of bond purchases. MPC seen as concluding that that most of the recent pick-up in yields reflected the improving outlook. GBP/USD tested the 1.40 level before retreating.
  EUR/USD failed to breach the 1.20 level before US yield shot up and supported the greenback. Pair at 1.1940 ahead of the US morning.
• USD/JPY back above the 109 level ahead of the BOJ policy decision on Friday. USD aided by rising yields in the pair.
• Norway Central bank (Norges) showed some hawkish feathers as it brought forward its 1st potential rate hike. EUR/NOK fell from 10.08 to 10.02 in the aftermath of the revised rate path

Economic data

• (NL) Netherlands Feb Unemployment Rate: 3.6% v 3.6% prior
• (CH) Swiss Feb Trade Balance (CHF): 3.7B v 5.0B prior; Real Exports M/M: -1.4% v +6.0% prior; Real Imports M/M: 0.3% v 1.8% prior; Watch Exports Y/Y: % v -11.0% prior
• (ID) Indonesia Central Bank (BI) left the 7-Day Reverse Repo unchanged at 3.50% (as expected)
• (CH) Swiss Feb Producer & Import Prices M/M: 0.0% v 0.3% prior; Y/Y: -1.1% v -2.1% prior
• (TW) Taiwan Central Bank (CBC) left the Benchmark Interest Rate unchanged at 1.125% (as expected)
• (SE) Sweden Feb Unemployment Rate: 9.7% v 9.3% prior; Unemployment Rate (seasonally adj): 8.9% v 9.0%e; Trend Unemployment Rate: 8.8% v 8.9% prior
• (NO) Norway Central Bank (Norges) left the Deposit Rates unchanged at 0.00% (as expected) but brought forward its potential rate hike to latter this year
• (IT) Italy Jan Total Trade Balance: €1.6B v €6.8B prior; Trade Balance EU: -€0.2B v -€1.2B prior
• (PL) Poland Feb Sold Industrial Output M/M: 4.3% v 5.2%e; Y/Y: 2.7% v 3.8%e
• (PL) Poland Feb PPI M/M: 0.8% v 0.5%e; Y/Y: 2.0% v 1.5%e

Fixed income Issuance

• (ES) Spain Debt Agency (Tesoro) sold total €6.167B vs. €5.5-6.5B indicated range in 2024, 2028 and 2050 bonds
• Sold €2.13B in 0.0% May 2024 SPGB bonds; Avg yield: -0.396% v -0.410% prior; Bid-to-cover: 1.83x v 2.56x prior
• Sold €3.05B in new Jan 2028 SPGB bonds; Avg yield: 0.000% v -0.121% prior; Bid-to-cover: 1.70x v 2.29x prior
• Sold €987M in 1.00% Oct 2050 SPGB Avg Yield: 1.297% v 0.854% prior; bid-to-cover: 1.55x v 1.62x prior

Looking Ahead

• (IL) Israel Mar 12-month CPI Forecast: No est v 0.8% prior
• 05:50 (FR) France Debt Agency (AFT) to sell €8.5-9.5B in 2024, 2026 and 2028 bonds
• 06:00 (EU) Euro Zone Trade Balance (seasonally adj): €29.0Be v €27.5B prior; Trade Balance NSA (unadj): No est v €29.2B prior
• 06:00 (EU) Euro Zone Q4 Labour Costs Y/Y: No est v 1.6% prior
• 06:00 (UK) BOE’s Cunliffe at BIS event
• 06:00 (EU) ECB chief Lagarde
• 06:00 (EU) Daily Euribor Fixing
• 06:00 (SE) Sweden to sell combined SEK1.25B in I/L 2026 and 2032 Bonds
• 06:00 (IE) Ireland Debt Agency (NTMA) to sell €750M in 6-month Bills
• 06:10 (EU) Daily ECB Liquidity Stats
• 06:30 (EU) ECB allotment in 3-year TLTRO-3 Operation
• 06:30 (HU) Hungary Debt Agency (AKK) to sell bonds
• 06:50 (FR) France Debt Agency (AFT) to sell €1.5-2.0B in inflation-linked bonds (Oatei)
• 06:50 (HU) Hungary Central Bank One-Week Deposit Rate tender
• 07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to raise One-Week Repo Rate by 100bps to 18.00%
• 07:00 (IE) Ireland Jan Trade Balance: No est v €5.5B prior
• 07:00 (BR) Brazil Mar IGP-M Inflation (2nd Preview): 2.4%e v 2.3% prior
• 07:00 (RO) Romania to sell RON400M in 4.15% 2030 bonds; Avg Yield: % v 3.34% prior; bid-to-cover: x v 1.87x prior
• 07:00 (SE) Sweden Central bank (Riksbank) Floden
• 07:10 (ES) ECB’s De Guindos (Spain) at conference
• 07:30 (UK) BOE’s Haldane (chief economist)
• 07:30 (CL) Chile Q4 GDP Q/Q: 6.4%e v 5.2% prior; Y/Y: -0.4%e v -9.1% prior
• 07:30 (CL) Chile Q4 Current Account Balance: $0.8Be v $0.0B prior
• 07:45 (US) Daily Libor Fixing
• 08:00 (UK) Bank of England Bank (BOE) Interest Rate Decision: expected to leave Interest Rate unchanged at 0.10% and maintain Asset Purchase Target at €875B
• 08:30 (US) Mar Philadelphia Fed Business Outlook: 23.5e v 23.1 prior
• 08:30 (US) Initial Jobless Claims: 700Ke v 712K prior; Continuing Claims: 4.03Me v 4.144M prior
• 08:30 (US) Weekly USDA Net Export Sales
• 09:00 (RU) Russia Gold and Forex Reserve w/e Mar 12th: No est v $580.1B prior
• 09:00 (UK) Daily Baltic Dry Bulk Index
• 10:00 (US) Feb Leading Index: 0.3%e v 0.5% prior
• 10:30 (US) Weekly EIA Natural Gas Inventories
• 11:00 (CO) Colombia Jan Trade Balance: -$0.9Be v -$0.9B prior; Total Imports: $3.8Be v $4.1B prior
• 13:00 (DE) ECB’s Schnabel (Germany)
• 15:00 (CO) Colombia Jan Economic Activity Index (Monthly GDP Y/Y: -4.8%e v -2.5% prior
• (EG) Egypt Central Bank Interest Rate Decision: Expected to leave Deposit Rate unchanged at 8.25%; Current Lending Rate at 9.25%;
• 19:30 (JP) Japan Feb National CPI Y/Y: -0.4%e v -0.6% prior; CPI Ex-fresh food (core) Y/Y: -0.4%e v -0.6% prior; CPI Ex-fresh food/energy (core-core) Y/Y: 0.2%e v 0.1% prior
• 20:30 (AU) Australia Feb Preliminary Retail Sales M/M: 0.6%e v 0.5% prior
• (JP) Bank of Japan (BOJ) Interest Rate and Policy Decision: Expected to leave Interest Rate on Excess Reserves (IOER) unchanged at -0.10% and maintain 10-Year Yield Target (YCC) at 0.00%
• 23:00 (CN) China to sell 50-year Bond
• 23:00 (CN) China to sell 3-month Bills